How do taxes work for automated trading?

The same as manual trading — the IRS doesn't care who clicked the button. In a taxable US account, positions held under a year generate short-term capital gains taxed as ordinary income, and most systematic strategies trade short-term by nature, so expect their tax drag to be meaningfully higher than buy-and-hold's. Frequent trading also triggers wash-sale adjustments when a position is re-entered within 30 days of a loss — common for mean-reversion systems. Practical mitigations: run high-turnover strategies inside tax-advantaged accounts (IRAs) where broker support allows, reserve taxable accounts for low-turnover approaches, and export your fill history at year end. This is general information, not tax advice — a CPA who's seen active-trader returns is worth the fee.